US fund giant Vanguard reportedly looking to shut China business, exit Ant JV

Vanguard Group, an US-based asset management major, has decided to shut its main office in the Chinese city of Shanghai after exiting Ant Group joint venture, a Reuters report said on Tuesday quoting five sources with knowledge of the matter. The Pennsylvania-based fund house, with $7.1 trillion in assets under management globally, has been operating in China for the past six years. Vanguard owns a 49 per cent stake in the Ant-controlled joint venture.

According to the report, a complete exit from China’s 27 trillion-yuan ($3.92 trillion) fund market has come about two years after the US fund house said it wouldn’t pursue setting up a fund management unit, a U-turn from previous ambitious expansionary plans in the market.

On its part, Ant said the joint venture and the fund advisory service “are operating as usual”.  

The Reuters report added that Ant has been notified about the planned withdrawal by Vanguard, which is considering buying Vanguard’s stake.

Two sources have said that Vanguard will be closing its Shanghai office, a separate entity from the JV with its own product and technology teams, and will lay off the staff there.

The US firm has reportedly notified the Shanghai local government, which was first reported by Chinese media Caixin last week.  

The Vanguard-Ant JV said in a company statement that it had 3 million investors as of January 2022. Its fund portfolio services rely heavily on automation.  

Vanguard’s sudden exit from China is in contrast with expansions planned by its contemporaries like BlackRock and Fidelity.

The Reuters report said the bank asset management arms of JPMorgan and Morgan Stanley each received approval to take full ownership of their existing China operations earlier this year.

Earlier, billionaire investor Mark Mobius said China has been restricting investment outflows from the country after opening up after the COVID-19 lockdowns.

In an interview with FOX Business, Mobius said investors should wary of “all kinds of barriers” imposed by the Chinese government. "I have an account with HSBC in Shanghai. I can't take my money out. The government is restricting the flow of money out of the country," Mobius, founder of Mobius Capital Partners, told FOX Business in an interview published on March 2.  

China has strict rules on foreign exchange and taking money out of the country.

Mobius, known for his bullish views on China and investment there, has led emerging market investment at Franklin Templeton Investments for over three decades. But recently, he said, he "would be very, very careful" investing in the country.

Denying Mobius’ charges, Chinese officials at the State Administration on Foreign Exchange (SAFE) said that it’s a matter of a “basic process and internal control requirements of the bank handling specific business.”  

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